Thursday, April 12, 2012

Massive tax increases

We are told that massive tax increases will be needed to cover the large projected deficits. History, however, shows that this strategy will not work. Regardless of the tax rate or the tax structure, tax revenues remain relatively constant as a percentage of GDP. Whether the “Laffer curve” or disincentives are responsible is moot. The fact is that since the mid 1940s there has been a ceiling on tax revenues related to GDP. The ceiling is unaffected by low or high top marginal tax rates that have ranged from 28 to 90%. Government is too large and needs to be cut back. The common man understands this; pompous politicians do not or will not. We now have a government that has become the biggest bubble of all. Like all other bubbles, it too will burst. The deficits are unsustainable. Tax increases will not change that reality.
Federal Income Tax Rates and Total Revenues